Kuwait: Capital Standards Rating Co. (CSR) has assigned an Insurer Financial Strength Rating (IFSR) of 'BB' and a National rating of 'BBBkw' to Al Safat TakafulAl Safat TakafulAl Safat Takaful Insurance Company
Al Safat Takaful
Kuwait | Financial Services
News | Profile | Officers
Company K.S.C. (closed). The outlook is stable. This is the first time that CSR rates Al Safat. The rating is based on the consolidated financial statements until June 2010.
The ratings reflect Al Safat's adequate capitalization, improving operating performance and relatively sufficient liquidity position. The company implements a conservative reserve accumulation strategy and relies heavily on reinsurance for its marine & aviation and general accident segments. Al Safat is expanding its insurance business and the company's underwriting performance indicators are improving. The company's rating is however constrained by its small market share of the Gross Premiums Written (GPW) and concentration in the Kuwaiti market. The investment in equities and unlisted funds further adds to the volatility of the company's financial profile. The outlook reflects CSR's view of the continued improvement in the company's insurance underwriting performance.
Al Safat Takaful Insurance CompanyAl Safat Takaful Insurance Company was established in 2005 according to Islamic Sharia and offers takaful insurance services in Kuwait. The company provides Islamic insurance in various segments such as marine & aviation, motor vehicles, fire and general accident, life and health. The major shareholders (not less than 10% stake) of the company are; Al Safat Group (28.9%), Al Ghanim Group (12.5%), Al Kharafi Group (10%), Commercial Bank of Kuwait (10%), Investors Group Holding (10%), Kuwait Finance & Investment Company (10%), and Commercial Real Estate Company (10%). This diverse group of prominent investors supports the company's insurance business.
Al Safat TakafulAl Safat TakafulAl Safat Takaful Insurance Company
Al Safat Takaful
Kuwait | Financial Services
News | Profile | Officers
is aiming to improve its market position in the Kuwaiti market which is becoming increasingly competitive with the presence and entrance of takaful insurers. The company's started underwriting in 2005 and by the end of FY2007, the company's Gross Premiums Written (GPW) has increased to KWD 3.09 mn. In FY2008, the GPW increased to KWD 3.86 mn registering 19% YoY growth. As of 2008, the takaful market in Kuwait represents only 16.7% of the overall insurance industry and this percentage continues to increase along with an increase in new Takaful Insurance companies joining the market. This indicates an increasing competition in the Takaful market. In FY2009, the GPW witnessed a 31.4% decline which was mainly due to a significant decline (91.2%) in Marine & Aviation premiums.
Al Safat's underwriting quality measured by the loss ratio has not changed significantly over the last 3 years. The majority of the claims have been incurred by the motor vehicle segment, whichis in line with the insurance industry norms. The expense ratio significantly improved in 2009 mainly driven by the increase in Net Premiums. We expect any improvement in the expense ratio in the near future would largely be driven by the increase in premium written.
For Takaul companies, shareholders' account's revenue is solely driven by investment income. Such heavy reliance on investment income is not sustainable during economic downturns, as investment income tends to be highly volatile. However, relying on investment income on the shareholders' accounts is common in the takaful industry due to the fact that the sole purpose of the shareholders' account is to support policyholders and to protect the value of shareholders.
The principal methodology used in rating Al Safat TakafulAl Safat TakafulAl Safat Takaful Insurance Company
Al Safat Takaful
Kuwait | Financial Services
News | Profile | Officers
Company is "Insurance Methodology", and it can be found at www.capstandards.com in the 'methodologies brief' sub-directory under the Rating tab.
In a continuous effort to benefit both local and regional issuers, CSR has developed rating scales that reflect issuers' scale and focus, whether global or regional. CSR developed a National Rating Scale along with its International Rating Scale to give maximum benefit for issuers when dealing with stakeholders (banks, investors, regulatory bodies, etc.). Small and regional issuers with only local and regional operations might be interested in knowing their creditworthiness when compared to their local peers only. While larger, internationally focused issuers would be more interested in knowing their position compared to global players. In all CSR's Ratings, an International Rating is assigned along with an equivalent National Rating.
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